Announced Actions for September 8, 2000

Presentation of FTC statement before the Board of Governors of the Federal Reserve System:

For Your Information

September 8, 2000

The Federal Trade Commission presented a statement yesterday on the following subject before the Board of Governors of the Federal Reserve System (the Board), in San Francisco, California: Predatory Lending Practices in the Home-Equity Lending Market. The Board sought the views of the Commission and others as part of the Board's responsibility to implement the Home Ownership and Equity Protection Act (HOEPA) amendment to the Truth in Lending Act (TILA). The statement was the latest in a series of presentations and Congressional testimonies given by the Commission addressing problems in the "subprime lending" market. Peggy Twohig, Assistant Director of the FTC's Division of Financial Practices within the Bureau of Consumer Protection, delivered the statement on behalf of the Commission.

The statement began by detailing the Commission's wide-ranging consumer protection responsibilities, including its jurisdiction over most non-bank lenders and its enforcement of a wide range of consumer credit laws such as the TILA, including the HOEPA, and the Equal Credit Opportunity Act (ECOA). HOEPA provides special protections for consumers involving certain non-purchase, high-cost loans secured by their homes and is intended to address predatory lending. The growing problem of predatory lending nationwide and its use in exploiting lower-income and minority borrowers were discussed. Next, the Commission's response to the increasing incidence of such loans was presented, such as its participation in an interagency taskforce to examine the problem, its law enforcement track record against abusive subprime lenders and its continuing consumer education program on this subject. This was followed by recommendations that the Board may wish to consider to further address predatory lending practices, including further restrictions on certain acts and practices under HOEPA and a revision of the Act's annual percentage rate (APR) and points and fees triggers, to expand its coverage. A ban on mandatory arbitration agreements in HOEPA loans, a ban on the financing of single-premium credit insurance and other extras, and clarification of the existing ban on asset-based lending were recommended. Finally, the statement addressed other issues on which the Board had requested FTC comment, including changes to HOEPA disclosures and the fact that HOEPA does not cover open-end home equity lines. The statement concluded by stressing the Commission's "support of the Board's efforts to expand HOEPA's protections to increase consumer protection in this important area."

Following a public comment period, the Commission has made final consent agreements with the following: BUY.COM Inc.; Office Depot, Inc.; and Value America, Inc. The Commission vote to finalize the consent orders was 5-0. (File Nos. 992-3282, 992-3313, and 992-3206; staff contact is Michael Dershowitz, Bureau of Consumer Protection, 202-326-3158; see press release dated June 29, 2000.)

Copies of the documents mentioned in this release are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; toll free: 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.